10 Questions to Ask Before Set-up Company in Vietnam

Foreigners are encouraged to make investment in Vietnam through direct investment by Setting up company in Vietnam.

However there are restrictions in some cases in regard to investment capital, investment area, special licenses required. The investor is suggested to consult with a law firm in Vietnam for advice and service offering.

 

Before setting up business in Vietnam, ask yourself the following questions:

1. Which business should I invest in Vietnam?

There are non-conditional investment areas and conditional investment areas.  Establishing company in the non-conditional investment areas are more simple than in conditional investment areas.  Investment in IT services, manufacturing, management consulting, business promotion are a few samples of non-conditional investment areas. Example of conditional investment areas are real estate, trading, travel agencies, freight forwarding…which are more complicated with investment conditions.  Investment conditions might also be changed over the time depending on the WTO commitments which Vietnam enters.

2. What should I name the business in Vietnam?

The company in Vietnam has to have Vietnamese name, and English name. The company could also have abbreviated name.  The name of the company in Vietnam indicates the structure of the company, the business lines, and the name that differentiate against other businesses.  For instance, the company could be named Alpha consulting limited liability company.

3. Where should I register the address of the business in Vietnam?

Not every address could be used to register a company.  The address has to be an address of a house with leasing agreement or office building which owner has license to operate as office building.

4. What is the legal structure of the company?

Depending on the number of investor contributing capital, company could be set-up as one member limited liability company or two or more member limited liability company or joint stocks company.

5. How much capital is required to set-up a company in Vietnam?

The investment amount depends on the business plan and is subject to the approval of the provincial Department of Planning and Investment evaluating application dossier. In some business areas like real estate, banking and finance, minimum capital is required. In general for non-conditional investment area, the law does not specify the minimum capital to establish a company in Vietnam however the State agencies that evaluate investment plan could reject the investment project which are not feasible. Bank statement in foreign banks could be used to prove sufficient fund of investment capital.

6. Whom will be legal representative and work permit in Vietnam?

The investor will need to appoint the legal representative in Vietnam to oversee the business performance and take legal responsibility in Vietnam. If the legal representative is an expatriate, whom is a capital contributing member or owner of a limited liability company or a member of the Board of Management of a shareholding company which is registered to operate in Vietnam, he or she will be exempted from work permit in Vietnam. Otherwise, he or she will need to have a work permit to work in Vietnam legally.  The work permit holder would then apply for temporary residence card to live in Vietnam as long as the work permit allows.

7. How long does it take to set-up a company in Vietnam?

It depends on what type, scale, and whether or not conditions are required. For a simple minimum capital without conditions to set-up, it would take 30 working days. For setting up company in conditional investment areas i.e.  trading company in Vietnam, time would be lengthen due to the involvement of a number of State agencies approving the investment project and it would take 60 working days. For setting up company in other investments in areas requiring conditions to meet, time might be taken depending on the type of conditions and the government agencies evaluating the conditions of investment.

8. Whom will be granting the investment license in Vietnam?

For most of the investment projects, the provincial state agencies with the approval of the Department of Planning and Investment (DPI) will be granting the Investment Certificate in Vietnam. However, depending on the type, scale, and whether or not conditions are required, other Vietnam State agencies might be involved. For the case of trading company, ministry of trade and commerce, ministry of finance, provincial people’s committee will be reviewing the investment application dossier as well.

9. What are the tax liability in Vietnam?

Major taxes in Vietnam are corporate income tax, import and export tax, value added tax, and personal income tax in Vietnam. In some special areas, there are other taxes. The corporate income tax is currently at 22% and will reduce to 20% beginning 2016. Export is mostly encouraged as such the export tax is 0 however there are special cases when export tax is larger than 0. Import tax varies according to tariff. Value added tax is mostly at 10% however in some cases, VAT could be 5% or 0%. Personal Income tax varies according to income level and is applicable from VND 9,000,000 above.

10. What are mandatory reports submissions requirement in Vietnam?

Companies are required to keep accounting books, prepare and submit tax reports on monthly, quarterly and annually. Foreign companies are also required to have financial audit taken before the financial year end. The financial year in Vietnam is from January to December and the deadline to submit financial report is March 30th for the previous year. Other reports are required to be submitted at other State agencies.

ANT Lawyers is a law firm in Vietnam, recognized by Legal500, IFLR1000. We are an exclusive Vietnam member of Prea Legal, the global law firm network covering more than 150 jurisdictions. The firm provides a range of legal services to multinational and domestic clients. For advice or services request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.

 

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What is the process of setting up a business by a foreigner in Vietnam?

Vietnam government passed the new law on Investment No. 67/2014/QH13 (New LOI) in 2014, and the new law on Enterprises No. 68/2014/QH13 (New LOE), which replace the previous laws as from July 1, 2015. Certain notable provisions of the new laws are asbelow.

● Requirements Capital: There is no requirements on foreign investment amount and registered capital in Vietnam. But registered capital can not less than 30% of total investment amount. The registered capital of encouraged/ large investment project can be reduced to 20%.

● Structure Foreign investors (company/ individual) can adopt one among following three structures when setting up company/ factory in Vietnam:

1. Direct investment by foreign company / individual; 

2. Indirect Investment through one holding company (single holding ); 

3. Indirect investment through two holding companies (double holding ).

The 2nd and/or 3rd structure is widely used. There are some advantages through holding company: 

1. Unlimited deferred offshore profits which can be used for re-investment; 

2. Limited liability on overseas lawsuits (civil and criminal ), and financial liabilities against parent company. 

The disadvantages of the single holding structure will occur when selling foreign assets, the parent company will be taxed for the profits. The parent company/individual will be exposed to unpredictable foreign risks and faces double-taxation problems. Therefore, the third structure - double holding is recommended.

● Procedures:

1. Setting up offshore holding company; 

2. Collecting holding company documents; 

3. Documents translation/ embassy notarization; 

4. Checking proposed Vietnam company name; 

5. Prepare the M&A and application form; 

6. Evaluation of investment project by related authorities; 

7. Issuance of the enterprise registration certificate; 

8. Publish in newspaper gazette; 

9. Seal registration, open bank account; 

10. Tax, customs, and environmental protection registration.

Source: Quora

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Is Vietnam's government stable enough to smoothly set-up a foreign start-up business?

Vietnam became the 150th member of the World Trade Organisation (WHO) in 2007. This opened the entranceway for foreigners to get and operate businesses in Vietnam. Individuals and organisations are permitted to choose their area of investment, the structure of their business and the technique where capital is raised, so long as their choices are in compliance with Vietnamese law, international treaties and commitments.

Before starting a business in Vietnam, there are a few things you should keep in mind:

Setting-up a foreign-owned business in Vietnam can be done and even encouraged by the Vietnamese government, although the laws are complex and the procedure could be complicated. Modern business law is in its infancy in Vietnam. Regulations could be incomplete, ambiguous and at the mercy of conflicting interpretations by different government agencies. Getting the help of a skilled and well-connected Vietnamese lawyer is strongly suggested.

Foreigners are permitted to possess and operate their own businesses in Vietnam, either through indirect or direct foreign investment. Indirect investment could be created by individuals or organisations that may buy shares in Vietnamese firms or invest through stocks, investment funds or use other intermediate financial instruments. Businesses that are wholly foreign-owned or are taking part in joint ventures with a Vietnamese business are believed to be foreign direct investments (or FDI).

Exercising rights of importation and distribution:

According to regulated at Provision 1, Article 4, Decree 23/2007/ND-CP dated February 12 2007 of the federal government providing detailed guidance of Law of Commerce’s regulations on goods trading and directly related activities of FIEs in Vietnam (So called known as “Decree 23/2007/ND-CP”), an FIE is permitted exercise its rights to import and distribute goods in Vietnam if it meets the next requirements:

- The Investor is from a country or territory which really is a member of international treaties to which Vietnam is engaged and focused on open markets for goods trading activities and related;

- Type of investment should be in keeping with the roadmap of commitments under international treaties to which Vietnam is an associate and relative to regulations of Vietnam;

- Goods and services should be relative to market opening commitments of Vietnam and with of regulations of Vietnam;

- Scope of operation should be relative to the marketplace access commitments of Vietnam and with regulations of Vietnam;

- The business gets the approval of the competent authorities in Vietnam.

According to Vietnam's commitments to the WTO, since 2009, foreign investors have entitlement to import and distribute goods by means of a company with 100% foreign capital.

To guarantee the eligibility for licensing, as well as the above conditions, you additionally have to guarantee the following requirements:

- You must be considered a manufacturer of electric and electronic products likely to be distributed in Vietnam or be considered a trusted trader of electric and electronic products in the your country;

- The results of business operation in the your country should be positive, shown in the audited financial statements of the last 2 yrs;

- Registered office of the business or wholesale, shops must be in keeping with the look of Vietnam. Normally, investors will need to have accommodations office within a workplace for the Company’s hq and/ or a location for wholesale and retail at a planned-in-advance trade center;

- Investment capital should be sufficient to guarantee the feasibility to implement business projects in Vietnam.

Vietnam is among the better places in Asia for for foreign investors - given its recent rises in number of national economic centers, industrial parks, rental factory, and warehouses. Even though Vietnamese government is encouraging foreign investors (as a way to bring in foreign currency), they are not paying enough attention to improve the legal procedure and legal structure in regards to foreign investment.

Source: quora

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How ANT Lawyers Could Help Your Business?

Please click to learn more about Foreign Investment Lawyers in Vietnam or contact our lawyers in Vietnam for advice via email ant@antlawyers.vn or call our office at (+84) 24 32 23 27 71

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Hanoi calls on IT firms to set up shop

HANOI – The government of Hanoi City gives priority to the information technology (IT) sector, thereby facilitating companies to set up shop there, according to Nguyen Duc Chung, chairman of the capital city, at a dialogue with the startup community on August 25.

He said Hanoi is about to launch Vietnam’s startup opportunity finder startupcity.vn on October 10, with an aim to connect technology ecosystem players with new business opportunities.

Phan Lan Tu, director of the municipal Department of Information and Communications, said the city has 16,700 startups, with 800 of them active in the IT sector.

Many incubators like the IT Firms Incubator and the CMC Creativity Center have been set up in Hanoi so far this year. To date, the city is home to 15 incubators.

The director noted the number of incubators and startup-supporting centers in Hanoi has been rising, but they still lack the connection with each other, as well as the absence of policies to establish a single network of these centers to help them share experiences, facilities, mentors and investors.

She said the city will establish a startup ecosystem portal and a startup database. In particular, the portal in both Vietnamese and English languages will provide necessary information for startups and investors.

Besides, municipal authorities will find ways to build a shared service area to support startups. The facility will include co-working space, meeting and training rooms, incubators, and other facilities.

Notably, Hanoi will come up with mechanisms and policies which encourage private investors to set up venture capital funds.

Nguyen Trung Chinh, chairman of CMC Corporation, said at the dialogue that Hanoi should offer incentive policies on land rent and corporate income tax to hi-tech companies, including personal income tax incentives for experts in the sector.

Especially, Chinh said, the administrative procedures should be streamlined so as to create the most optimal conditions for local firms, especially startups, to grow.

He also proposed the municipal government give creative and private companies the green light to implement solutions on urban management, e-governments and smart cities. Besides, Hanoi should let them develop public services under the public-private partnerships.

Hanoi should have sufficient land to build centers for creative technology research. CMC is willing to develop the creative technology research zone that has research centers, incubators and labs, he said.

Hanoi City Chairman Chung pledged to create utmost favorable conditions for startups. The municipal government will team up with central management agencies to formulate policies.

Chung also said the city will kick off work on a software park on Vo Nguyen Giap Street in October.  Hanoi will hand over the land to enterprises responsible for building the zone.

Source: The Saigon Times

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Propose to Remove Nearly 2,000 Business Conditions

The Ministry of Planning and Investment has proposed to remove nearly 2,000 business conditions from ministries and sectors that are thought to cause difficulties and obstacles for businesses.

According to the report of the Ministry of Planning and Investment submitted to the Government, this agency proposed to remove 1,930 requirements and conditions on business that are considered as sublicenses hinder business for a long time. Of these, the Ministry proposed removing all or part of 302 financial conditions. In addition, 85 business conditions on location and 1,336 conditions on production capacity, 127 conditions on business methods, 80 conditions on planning… are proposed to be abandoned entirely.

In addition, other business conditions related to human resources issues (except for some professions that require professional qualifications and experiences such as doctor and auditor) and some conditions with inappropriate contents, the Ministry also recommends the abolition of all or part.

According to the report of the Central Institute for Economic Management (CIEM), there are about 4,284 business conditions, corresponding with 243 conditional investment businesses. Of these, the Ministry of Industry and Trade has the highest number of business conditions with 1,152 conditions; next is the Ministry of Agriculture and Rural Development, Ministry of Health…

Most of these business conditions are creating unreasonable barriers to investment, entry into the market, limiting the number of newly registered businesses, increasing production costs, discouraging businesses.

Moreover, business conditions also reduce market competition, productivity and competitiveness of the economy. Businesses also face with many risks in the process of operation when many business conditions are unclear, creating opportunities for the arbitrariness of state management agencies and the harassment of officials… These effects are going backwards and hinder the Government’s resolve to improve the business environment and cut costs for businesses.

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HCMC has 400 household businesses upgraded into firms

There have been 413 household businesses upgraded into firms in HCMC this year as the city has been trying to persuade household business owners to register as companies.

A report on the city’s economic performance showed January-May has seen 15,500 enterprises in the city receiving business registration certificates with total registered capital of VND193.8 trillion (about US$8.53 billion), up 10.4% and 54.2% respectively.

Meanwhile, fresh foreign direct investment approvals, including for mergers and acquisitions (M&A),in the first five months of 2017 in the city have shot up 46% against the same period last year to US$1.37 billion.

South Korea is the city’s biggest foreign investor with total investment pledges of US$95.11 million, 27.8% of the total, followed by Malaysia with US$45.07 million (13.2%), Singapore with US$39.91 million (11.7%) and Japan with US$38.9 million (11.4%).

The city government said that in the coming months, the city will continue fostering the startup ecosystem and support the upgrade of household businesses to companies.

The city looks to have 60,000 enterprises newly registered this year and the total number of firms in the city will rise to half a million by 2020. The total number of sactive firm here at the moment is around 300,000.

A recent report of the HCMC Tax Department showed the city has more than 36,472 household businesses eligible for upgrade to firms. The city expects 21,000 of them to become firms this year.

Once upgraded to firms, household businesses will have the opportunity to expand operations, promote brands, and gain easier access to bank loans and other benefits. In case of losses, they will be exempted from corporate income tax and can carry forward losses to the following years.

Source: The SaigonTimes

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TAX OBLIGATIONS FOR FOREIGN ENTITY DOING BUSINESS IN VIETNAM

The applicable taxes including value added tax (VAT), corporate income tax (CIT) and personal income tax (PIT).

On August 6th 2014, the Ministry of Finance issued Circular No. 103/2014/TT-BTC guiding the implementation of tax obligations that are applicable to foreign organizations and individuals doing business in Vietnam or having incomes generated in Vietnam.

Taxpayers: foreign contractors, foreign subcontractors; organizations established and operated under the law of Vietnam, organizations register to operate under the law of Vietnam, other organizations, individuals producing and trading.

The applicable taxes including value added tax (VAT), corporate income tax (CIT) and personal income tax (PIT).

Taxable income of foreign contractors and foreign subcontractors is income derived from the provision and distribution of goods; provision of service, service in association with goods in Vietnam on the basis of the contractor contract and subcontractor contract.

CIT Payable

=

Revenue subject to CIT

x

CIT rate calculated on taxable turnover

Subjects liable for VAT: services or services associated with goods provided by foreign contractors, foreign subcontractors on the basis of the contractor contract, subcontractor contract to use for manufacturing, trading and consumption in Vietnam.

Incomes arising in Vietnam of foreign contractors and foreign subcontractors are earnings received in any forms on the basis of the contractor contract, subcontractor contract (except for cases specified in Article 2, Chapter I of this Circular), regardless of the place conducting business operations of foreign contractors and foreign subcontractors.

Circular specifically instruct the following cases:

1. Pay VAT by deduction method; pay CIT on the basis of cost and revenue declaration to determine taxable income.

2. Pay VAT and CIT by percentage on turnover.

3. Pay VAT by deduction method; pay VAT by percentage on turnover.

Issued together with Circular 103 is the tax declaration form for foreign contractor.

This Circular takes effect from October 1st 2014, replaces Circular No. 60/2012/TT-BTC dated April 12th2012 of Ministry of Finance guiding the implementation of tax obligation applicable to the foreign organizations and individuals doing business in Vietnam or having income in Vietnam.

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Assistance in setting-up business venture

To help Clients start business in Vietnam, ANT Consulting introduces the service to assist in setting up business venture in Vietnam.

Foreign investors could make direct investment in Vietnam through setting up one hundred per cent (100%) capital of foreign investors, or establishing joint venture between domestic and foreign investors, or  investing in the contractual forms of: BCC, BO, BTO, and BT

Setting up company in Vietnam

Setting up company in Vietnam

Types of enterprise for foreign investors to invest in Vietnam are as following:

a)     Limited Liability Company

A limited-liability company may not issue securities to mobilize capital.

b)     Joint Stock Company

The main difference between Joint Stock Company and Limited Liability Company is the Joint Stock Company can raise funds by offering shares or securities.  In addition, an enterprise tends to join the Stock exchanges or public company must be a Joint Stock Company.  Management system of Joint Stock Company is more complicated than Liability Company.

c)     Partnership

Unlimited liability partners must be individuals who shall be liable for the obligations of the company to the extent of all of their assets.  Limited liability partners shall only be liable for the debts of the company to the extent of the amount of capital they have contributed to the company.

d)     Representative Office of foreign Trader

Representative Office is not allowed to directly conduct profit making activities in Vietnam (i.e: the execution of contracts, direct payment or receipt of funds, sale or purchase of goods, or provision of services)

e)     Branch of foreign trader

The Branch is permitted to conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

f)      The investing measures by signing Contracts

If you are interested in investment in Vietnam and need help from professional business consultants, please send us email at ant@antconsult.vn.

Let us help your business in Vietnam.

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